The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, and Abbott Laboratories, La Monica does not own positions in any individual stocks.
Anyone who's seen "Thelma and Louise" knows that cars and cliffs don't tend to get along too well. But shares of Ford (F) are up nearly 15% since the broader market first started to slip in October on fears of the looming fiscal cliff.
Interestingly enough, Geena Davis and Susan Sarandon drove a baby blue Ford 1966 Thunderbird into the abyss at the end of the movie.
The fact that Ford has done well is a bit surprising. You'd think that worries about higher taxes and spending cuts would drive (sorry!) people away from the auto dealerships. Why make a huge purchase at a time when there is so much economic uncertainty? Throw in concerns about Europe's debt crisis and a slowdown in China and it's even more shocking that investors are favoring Ford right now.
Yet Ford isn't the only automaker whose stock has thrived while the S&P 500 has dipped. Shares of General Motors (GM), Toyota Motor (TM), Honda Motor (HMC) and even unprofitable electric car maker Tesla Motors (TSLA) are all up too.
Jim Kee, president of South Texas Money Management in San Antonio, said that it makes sense for auto stocks to be rallying. He pointed to statistics that show the average age of cars and trucks on the road in the U.S. is now at an all-time high of 11 years.
"We are just at the early stages of an upswing in auto sales. There is so much pent-up demand," said Kee, whose firm owns shares of Ford and GM.
But even though times may be looking good for all automakers, Ford's stock has been the best performer of the bunch. And that trend could continue.
For one, Ford's stock remains pretty cheap. The stock is trading at less than 8 times 2013 earnings estimates. That's a tad more expensive than GM, which is valued at about 7 times earnings forecasts. But Ford is a bargain compared to its Japanese rivals. Toyota and Honda both trade around 10 times profit projections for their next fiscal year.
Ford, which in case you forgot was the one member of Detroit's Big Three that didn't need a government-assisted bailout/bankruptcy, also has something that GM lacks: a dividend. Ford reinstated its quarterly payout earlier this year thanks to improvements on its balance sheet. Ford had gotten rid of its dividend in 2006. But its new dividend yields a decent 1.8%, which is higher than the rate on the 10-year U.S. Treasury note.
Kee said he likes Ford and GM equally. But for many investors, Ford appears to be the preferred choice because of the fact that it didn't have to go through Chapter 11. Kee conceded that the Treasury Department's stake in GM may be an overhang on the stock.
It makes sense. Used car salesmen may have a bad reputation. But politicians and bureaucrats in Washington, D.C., are probably hated even more. So, until GM can completely shed the Government Motors tag, Ford may continue to look more attractive than its bigger Detroit competitor.
But perhaps the best news about Ford in recent weeks is the fact that its well-respected CEO, Alan Mulally, isn't going anywhere for a few more years. There had been rumors that Mulally might soon retire, but earlier this month Ford announced he would remain CEO until "at least 2014."
Mulally is widely credited with keeping Ford away from bankruptcy. During his tenure, the company was prescient enough to borrow money before the credit markets froze in 2008. Ford has also boosted its market share during the past few years thanks to an emphasis on more fuel-efficient vehicles such as the Focus, Fusion and Fiesta.
"Ford has come up with some great products over the past few years and the fact that Mulally will still be around for a few years is a great sign. He has enhanced the value of the company. It's as simple as that," said Bob Bacarella, manager of the Monetta Fund in Wheaton, Ill. Bacarella said Ford is a long-time holding in the fund and he thinks the stock could double over the next few years.
Ford also smartly followed the lead of companies like IBM (IBM) and Apple (AAPL) and formalized a clear succession plan for the firm. Ford promoted Mark Fields to the title of chief operating officer, paving the way for Fields to take over for Mulally once he does retire.
Contrast this seamless transition with the mess made by chipmaker Intel (INTC), which announced earlier this month that CEO Paul Otellini would be stepping down next May. Intel did not name a successor and left the door open for the company to hire an outsider as opposed to just promoting from within.
Of course, Ford could get hurt if the U.S. plunges over the fiscal cliff. But Ford appears to be on much more solid footing than its rivals -- and with Mulally still having his hands on the CEO steering wheel, investors are hoping Ford can avoid the disastrous fate that met Thelma and Louise's T-Bird.
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